Hong Kong office leasing volume hits highest half-yearly total since 2019

Leasing volumes in H1 2024 reached 2.3m sq ft.

According to CBRE analysts, leasing volume in Hong Kong’s office sector softened in Q2 2024 compared to the previous quarter when several major relocations and quasi-government leasing deals were completed. Gross leasing volume fell 27% quarter-on-quarter to 1.0 million sq. ft. Over 30% of activity occurred in buildings completed after 2021. 

For H1 2024, office leasing volume heightened for the fourth consecutive quarter to 2.3 million sq. ft., the highest half-yearly total since H1 2019.

Here’s more from CBRE:

Net absorption totalled 351,900 sq. ft., staying positive for a fourth consecutive quarter, partly due to newly-leased space in recently-completed buildings. For H1 2024, net absorption registered 1.0 million sq. ft., the most for a half-yearly period since H2 2018. 

Central saw 39,800 sq. ft. of net absorption in Q2 2024 and 35,400 sq. ft. in H1 2024, mainly driven by improved occupancy in The Henderson. Thanks to several major commitments in AIRSIDE, Kowloon East remained the best-performing submarket, logging 183,300 sq. ft. of net absorption quartering Q2 2024 and 416,000 sq. ft. in H1 2024.

New supply totalled 631,100 sq. ft. in Q2 2024, bringing the half-yearly total to 1.5 million sq. ft. Citywide vacancy reached 15.0 million sq. ft. or 16.9%. Central vacancy rose to 14.0%, marking the first time since June 2004 that vacancy in this submarket has reached the 14% threshold. New supply also ensured Central also registered the sharpest jump in vacancy of any submarket in H1 2024, logging an increase from 9.7% to 14.0%.

The vacancy overhang ensured rents fell 1.6% quarter-on-quarter, accelerating from the drop of 0.6% quarter-on-quarter seen in Q1 2024, bringing the half-yearly decline to 2.1%. Despite an increase in space availability, Central rents dropped the least, falling by 0.5% quarter-on-quarter.

Ada Fung, Executive Director, Head of Advisory & Transaction Services, CBRE Hong Kong: “The Grade A office leasing market sentiment has improved with positive net absorption recorded for the fourth quarter in a row. The demand for office space has been largely stable, newly completed office space, particularly in decentralised locations, is gaining popularity as some occupiers choose to upgrade their offices at affordable rents. For the remainder of the year, leasing demand is expected to strengthen further as overall economic momentum and financial market sentiment further improves. High vacancy rates and new supply will likely continue to drive rents downward.”